Business and finance call on government to unlock demand for low-carbon products and accelerate industrial projects worth $1 trillion

Governments must urgently act to stimulate demand for green materials, chemicals and fuels to accelerate the decarbonisation of the world’s highest-emitting industries, according to 40 business and finance leaders and coalitions, which represent more than 1,000 companies and financial institutions, in a new open letter. Doing so could unlock up to $1 trillion of investment and bring more than 500 green industrial plants awaiting finance to construction by 2030. This would enable the emissions reduction needed from six of the highest emitting industries - aluminium, cement, chemicals, steel, aviation and shipping - to align with a 1.5°C pathway in the next decade while creating sustainable growth.

New data published today by the Industrial Transition Accelerator (ITA) and the Mission Possible Partnership (MPP) reveals a growing pipeline of industrial projects - nearly 700 across aluminium, cement, chemicals, steel, aviation and shipping. However, less than 20 per cent are operational or have secured the finance and approvals necessary to begin construction. Since April 2024, only eight facilities globally have reached the Final Investment Decision (FID), leaving 561 in the pipeline, announced but not yet definitively confirmed. More than half of these (300) have been awaiting investment decisions for at least two years. If this rate continued linearly, it would take around 35 years for enough facilities to begin construction- missing the 2030 emissions reduction targets by decades.

To move to a 1.5°C-aligned trajectory in heavy industry and transport sectors and avoid 2Gt of CO2 p/a by 2030 and 6Gt of CO2 p/a by 2040, the full pipeline of projects must be financed and begin construction within the next two years.

Green industrial projects stuck in a stalemate

A lack of appropriate policies has led to insufficient demand for green products—such as green ammonia, green steel, cement, and sustainable aviation fuels—leaving corporations and financial institutions without the certainty needed for long-term investments. As a result, many projects are stalled, according to the signatories of the open letter. Buyers are unable to commit to long-term offtake agreements at scale due to the continued availability of cheaper, higher-carbon equivalents and lack of incentives to opt for the cleaner option. This has been further compounded by the recent economic downturn, with lower margins making an unfavourable backdrop for investment decisions.

Policy measures to unlock demand and level the playing field

Led by the ITA and endorsed by The Glasgow Finance Alliance for Net Zero (GFANZ), the coalition of over 700 financial institutions from more than 50 countries, the open letter calls for governments to deploy a range of policy measures, noting that the right approach and policy mix will vary by country and by sector:

• Supporting global carbon pricing and fuel standard measures in sectors where these are on the horizon (e.g. the mechanisms currently under development at the International Maritime Organisation) and implementing such policies domestically where they are not (e.g. in heavy industry).
• Setting and enforcing mandatory quotas for low- and near-zero-carbon fuels and products that become stricter over time, such as clean hydrogen, ammonia, methanol and SAF.
• Setting mandatory targets for low- and near-zero-carbon materials in public procurement, especially for cement, concrete and steel.
• Setting stringent and progressively tightening limits on whole-life carbon (including embodied carbon) in key product standards (e.g. automotive, white goods) and in building standards.
• Implementing mechanisms that help bridge the remaining gap between the price of green commodities and the willingness to pay off potential buyers for the next wave of projects.

By providing incentives and setting mandates to use green materials, chemicals and fuels, governments can level the playing field for buyers, create market certainty, and improve the business case for the production of these green commodities.

“We already have the technologies we need to decarbonise our economies and prevent further climate breakdown, and now we have the projects to bring them to market”, said Faustine Delasalle, Executive Director of the ITA Secretariat and Chief Executive Officer of the Mission Possible Partnership. 

“But we’ve reached a stalemate between producers and buyers that cannot be broken while buyers are not incentivised to purchase green products that still compete against cheaper, higher-carbon products. As we’ve witnessed in several sectors and countries, governments have the power to change this and drive the progressive uptake of green materials, fuels, and chemicals."

“Together with some of the largest global businesses and financial institutions, we are calling on governments worldwide to implement policies we know are proven to lock in demand for green commodities. It is encouraging to see countries in emerging markets and developing economies pursue these opportunities alongside developed economies. We have a 2-year window of opportunity remaining to start construction of green production facilities for them to be up and running by 2030. There is no time to lose.”

Detailed policy measures to increase demand and supply outlined in new Policy Playbook

Voluntary corporate initiatives have already been put in place to stimulate initial demand for new clean technologies. While these have enabled first-of-a-kind projects, they cannot scale in a way that unlocks investment for the next wave of green industrial projects.

Alongside the open letter, the ITA has published a Green Demand Policy Playbook setting out the range of evidence-based policy measures available to governments to increase demand for low- and near-zero-carbon materials, chemicals and fuels – such as green ammonia, green steel and cement, and sustainable aviation fuels – so as to unlock supply. Key measures highlighted in the playbook include:

1. Carbon pricing, which is critical to level the playing field between green and carbon-intensive commodities and is most effective when it provides market predictability, reaches a sufficient level to make low- and near-zero-carbon materials competitive and addresses risks of carbon leakage.
2. Mandatory mechanisms, such as mandatory quotas and fuel mandates, and embodied carbon intensity limits on industrial products like automotive and buildings, have proven powerful tools to create certainty of market scale-up, for example, in aviation in Europe.
3. Government procurement, in particular green public procurement of green cement and steel.
4. Financial support mechanisms and government-backed intermediaries that help bridge the remaining gap between the price of green commodities and the willingness to pay off potential buyers (especially in value chains that can be sensitive from a social perspective like fertilizers for agriculture), such as subsidies, contracts for difference, and state-backed intermediaries.

The aviation sector is seeing similar demand-stimulating mechanisms successfully translating project announcements into FIDs. In Europe, Sustainable Aviation Fuel (SAF) blending mandates such as the EU-level ReFuelEU legislation and the UK’s incoming SAF mandate are supporting the scale-up of SAF production and have contributed to Europe having the largest project pipeline of any region.

These policies are also highly synergistic across sectors – triggering demand can drive decarbonisation for multiple upstream sectors. Stimulating green demand in construction, for example, will drive the production of green materials across several sectors (concrete, steel, and aluminium). Embodied carbon emissions limits on buildings could have the added benefit of driving materials efficiency alongside demand for green construction materials. In addition, driving demand for a green commodity whose production relies on clean hydrogen- like green fertilisers – can lead to lower production costs for green hydrogen, benefitting other sectors like steel or power-to-liquid SAF.

Emerging markets and developing economies offer fertile soil for the green industry

A number of emerging markets and developing economies (EM&DEs) are seeing an increase in the project pipeline. An abundance of low-cost renewables and access to critical materials, combined with the implementation of new, supportive policies, have driven the pipeline and investment across regions like India, Brazil and South-East Asia.

In India, the National Green Hydrogen Mission includes a mix of policies, including mandatory quotas, competitive bidding processes for production and procurement, and the development of green hydrogen hubs that support large-scale production and utilisation.

Data from the MPP highlights that 24 of the 46 new projects announced since April are from EM&DEs, such as Vietnam and Malaysia, and almost forty per cent of new FIDs were taken in EM&DEs, including in Morocco and Namibia.

“To meet climate targets for heavy industry and transport, we need to bring more projects online faster”, said Simon Stiell, Executive Secretary of UN Climate Change. “We now need stronger and clear policy statements from governments to further drive green demand at scale and unlock capital flow to technologies that can accelerate decarbonization. The next round of national climate plans needs to cover all sectors of economies. So we need as many countries as possible to set more ambitious industrial targets in these revised NDCs next year.”

“The Industrial Transition Accelerator is bringing together business, finance, and government leaders committed to increasing investment for clean energy projects,” said Michael R. Bloomberg, UN Secretary-General’s Special Envoy on Climate Ambition and Solutions, Founder of Bloomberg L.P. and Bloomberg Philanthropies, and ITA Co-Chair. “To deliver on the promises of the Paris Agreement while supporting growth and jobs, it's critical that we all move faster to help bring these projects to life.”

“The decarbonisation of heavy emitting industries is being held back by uncertainty about the scale of green demand,” said Mark Carney, UN Special Envoy on Climate Action and Finance, Glasgow Financial Alliance for Net Zero Co-Chair, and ITA Co-Chair. “Governments can unlock huge investment in these sectors, creating jobs and strengthening growth with smart policies that promote the use of sustainable products. The measures outlined in the Policy playbook would give producers, their customers and financial institutions the confidence they need to act. Early movers can boost their competitiveness, positioning their economies to seize the opportunities created by the transition to a net zero economy.”